Over the last few days Redpoint Bio Corporation (OTC:RPBC) has experienced a dramatic increase of its stock price coupled with serious trading activity. Starting the new year at $0.105 per share, the price is now $0.20. This almost 100% increase the stock achieved mainly in Friday`s session, opening at $0.13 and closing at $0.20. The rise is considerable, but the volume of traded shares that day is astonishing: the over 1.1 million transactions is an all-time high for the company. Now, over the course of last year constant ups and downs in the price followed RPBC share price on the market. Yet, there were more or less objective reasons for both. As a development stage biotechnology company, boosted activity on the market would usually be provoked by announcements about signed agreements, successful product tests or financial reports.
On the other hand, Friday`s session seems to have been heavily affected by a blog publication. According to it, the company had just received a $240k grant under the Qualifying Therapeutic Discovery Project, as well as $744k in the form of non-dilutive financing. Most importantly, this particular article stated that a supply agreement for one of Redpoint`s products might be coming and the company may be highly undervalued at present.
Given the positive nature of the above-mentioned, one would assume that if the information was true the company itself would have posted it on its website. But the fact of the matter is that Redpoint`s last similar announcement came out last November. It was the same month that the company actually released its latest 10-Q and 8-K financial reports. They, however, do not share the trader`s optimism of the last few days.
According to the 10-Q form, Redpoint has an accumulated deficit of $56 million due to the negative cash flows each year since 1995 when the company was founded. Again stated in the report is the fact that the revenues came from corporate collaborations, license agreements and government grants and would continue to do so in the near future. If a supply agreement of some sort indeed happens in the next few months, the numbers on the balance sheet might not look so bad after a few years.
The truth is though, that nothing of that sort is guaranteed or even announced as a possibility from the company’s management. Which in terms suggests that the good results on the stock market might not last long, having in mind the accumulated deficit of $56 million and the net loss of $4.8 million just for the first three quarters of 2010.
